Gift Letters for Your Mortgage Down Payment

When you are in the process of buying a home it is important to choose the mortgage and lending option that works best for you. One such option is using gift funds to pay a portion of the down payment or closing costs. This gives you the opportunity to secure better and more manageable mortgage terms. However, it is important to understand the process relating to the use of these funds so that you have all the information you need before applying for a mortgage.

What Is a Gift Letter?

In order to use a gift toward the purchase of a new home, there are certain requirements you must fulfil. One such requirement is obtaining a mortgage gift letter from the person who will be providing the funds. A gift letter for mortgage applications basically states that the person giving you the money is doing so as a gift and not a loan. This means that there is no expectation or implication of repayment for the money so the mortgage lender is confident the donor will not make future claims in order to collect.

What Should a Gift Letter Include?

Writing a mortgage gift letter is simple. There are a few elements that you must include to satisfy the requirements when using these funds, which can easily be completed prior to applying for a mortgage. In addition to the names and signatures of the donor and recipient, it is necessary to include the amount of the gift, the donor’s relationship to the recipient, and the address for which the gift will be applied to. You must also certify that there is no expected repayment of the gift and that the funds being used were not provided by a third party with interest in the sale of the property being purchased.

The final pieces of information you will need for your gift letter are confirmations that the money has been withdrawn from the donor’s account and received by the purchaser. This can be done with bank statements or other certified documents for proof. If you need assistance writing the letter, use our mortgage gift letter template to get started. To get started, here are some steps to complete for the gift letter: